DMart’s Deflation Dilemma: Avenue Supermarts Feels the Price Pinch in Q1

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Avenue Supermarts Ltd, which owns DMart, posted a mixed bag in Q1FY26. Though top-line growth rose 16% year-on-year to Rs 15,932 crore, the business saw margin compression due to deflationary pressure in staples as well as non-foods.

Key Highlights:

Debt-free PAT was Rs 830 crore, increasing just 2% YoY, short of analyst expectations

EBITDA rose 7.5% YoY to Rs 1,313 crore, while margin fell to 8.2% from 8.9%

Deflation in broad product categories cut 100–150 basis points from revenue growth

Nine new shops added, bringing the total to 424

Same-store sales per square foot also increased to Rs 9,200

Deflationary Impact:

Non-food items and staples witnessed a steep fall in prices, impacting topline growth.

Aggressive price competition in FMCG led to compressed gross margins

Operating costs rose with higher wages and store expansion

Investor Sentiment

Shares declined 2% to Rs 4,069 on NS

Analysts viewed margin squeeze as the largest problem despite consistent growth in revenue

The company's inorganic growth strategy remains aggressive, but profitability has been questioned

Prospects: DMart's value proposition model is robust, but its capacity to maintain margins amid deflation and heightened cost pressures will be essential. How efficiently the retailer achieves scale will determine its course over the next few quarters.

Sources: Zee Business, Moneycontrol, Economic Times, ICICI Direct, AInvest